Ten Things: Early Case Assessments – What In-House Lawyers Need to Know | Ten Things You Need to Know as In-House Counsel®

Somewhere in my first few months or so of blogs is one I wrote about what to do when your company has been sued. In it, I set out a lot of important things to do when you first get served with a complaint. There’s a lot of useful information in there, but I left out an important part of what to do in those early days of litigation. It was deliberate because I knew then that the topic deserved its own “Ten Things” post. So, I did what I usually do when I have an idea – I jotted it down on a Post-It note and set it aside, with every intention of coming back to it in a few months. Three years later I found that Post-It jammed in a folder with a lot of other blog ideas, staring at me like an abandoned puppy wanting to be taken home. Damn you sad-eyed Post-It note. Get in the car.

And here I am on a Sunday afternoon staring at that Post-It note again, finally willing to give it it’s due. What does it say? It says, “Early Case Assessment” (and “Call Mom”).[1] I am a little saddened to see that in many eyes, Early Case Assessment has become an exercise in e-Discovery. There’s nothing wrong with that other than I think it makes the scope of an ECA much too narrow. Some e-Discovery review should be part of the assessment but it is not the focus. I think of ECA a bit more “old school” in scope and something that’s going to take a lot of elbow grease, detective work, and creative thinking – just what lawyers do best. This edition of “Ten Things” discusses what you need to do to put together a top-notch Early Case Assessment:

1. The Basics. Not everyone is familiar with what an Early Case Assessment is, so let’s start there. An ECA is simply a systematic way for the Legal Department to thoroughly analyze newly filed litigation within a relatively brief time frame to allow the company to:

Evaluate the case and what it’s worth (vs. the cost of litigating)
Develop a fulsome litigation strategy (i.e., how best to defend the case),
Analyze potential settlement options that could end the case quickly.

While it’s relatively easy to define, it’s not easy to do – or do correctly that is. To create a proper ECA you need to prepare yourself to devote the time necessary to do it properly. Your goal is to get the assessment prepared within around 60 days of receiving the complaint and present your detailed findings to the executive team so they can make critical decisions early in the litigation process vs. waiting months (or even years) to make those same decisions. This is a vastly different undertaking then giving the executive team a quick overview of the case and your initial thoughts within the first week or so. Additionally, to do it correctly requires not only the involvement of your outside litigation counsel, but also the assistance of your colleagues in the business closest to the dispute. If you do it correctly, an ECA will inevitably help you drive better results with litigation, either in terms of resolution or cost and most likely both. Better results with less cost is almost guaranteed to make you a hero. Finally, how formal you make the ECA is up to you. You will want something in writing, either a memo or a PowerPoint, the latter being needed regardless for the ultimate presentation to the executive team.

2. What’s this lawsuit all about? One of the first questions you’re going to get about the lawsuit is “What are they suing us over?” Consequently, your ECA will contain a summary of the complaint and the allegations against your company. Pretty simple, right? It is, only this is not a solo act. It’s fine for you to read and have an initial understanding of the lawsuit, but for purposes of the assessment you need to go deeper. A lot deeper. Within a week or so of receiving the lawsuit, you need to set up a meeting with you, your outside counsel, and the key company witnesses or actors in the dispute and basically do a page turn of the complaint together (i.e., a table read). You will literally read each allegation made by the plaintiff as a group and discuss the merit (or lack thereof) of each, along with potential witnesses and sources of evidence to refute the claims. Not only will this help you generate a more comprehensive and useful summary of the lawsuit, it will give you insight into the relative merits of the complaint overall and help you start to collect the key documents and facts you need to complete the legal analysis portion of the ECA.

3. Cost to litigate. No surprise but the ECA requires a well-researched estimate of the cost to litigate, because a driving factor in how the company will deal with the lawsuit is money. Your first task is to sit down with your outside counsel and work out a realistic budget going all the way through trial and appeal. You should track the cost by stages because it’s unrealistic to think the case will go all the way to trial and appeal. And, if you set out the budget by stages, you can have several decision points for the business before they commit to spending money on the next stage. Any experienced litigation counsel can give you a solid estimate of the cost to litigation, especially if they are working closely with you on the ECA as they will then have way more detailed knowledge about the “good and the bad” of your case than most outside counsel will ever have. And any counsel who won’t give you an estimate shouldn’t be your counsel. When estimating cost don’t forget to include the costs, i.e., things like copies, filing fees, deposition costs, expert witness fees, travel, and so on. This can be a considerable number, especially if the litigation is pending away from your office. For example, if the case goes to trial you will need hotel rooms for the trial team, in-house teams, witnesses, corporate representative, along with work rooms and office equipment. And you’ll need to feed everyone too. The lesson here is don’t focus only on attorney fees. Another helpful trick is to try to estimate what the other side will spend. Litigation isn’t free for plaintiff’s, so an understanding of what they will be spending can assist you with your planning and strategy. You should also make some attempt to account for the downtime of management and company witnesses in dealing with the litigation. There will be a significant burden of time on many people and this cost should be part of your math. Additionally, fully explore whether the company has insurance that may cover the lawsuit or if there is another party who may owe an indemnity to your company. Both cost-shifting mechanisms will dramatically change your analysis of how best to defend the litigation. Finally, consider whether you have the ability to use litigation financing to offset some or all of the cost. While generally a tool used by plaintiffs, it does work for defendants as well.

4. Key documents and facts. The core of the Early Case Assessment is the investigation into the facts. Your task is to dig as hard and deep as you can in roughly two months. You won’t know everything about your case but you’ll know 75%-80% of it. A major limitation is that you don’t have access to the other sides’ witness nor their documents and emails. Still, there is enough information you can gather from your own sources that can get the job done. You need to do an initial document search (which is much easier now due to e-Discovery tools and techniques) and you’ll need to interview all the key witnesses. This legwork is hard and not inexpensive, but it is part of an overall process that repeatedly pays dividends if done consistently and correctly. Once you’ve done the detective work, the ECA should include the following:

The 10 best documents for each side
The 10 best facts for each side
Interview summaries of key witnesses
A list and description of any “hot documents” (i.e., smoking guns, commercially sensitive, and so on)

5. Outline the legal issues. The two most frequent questions you hear from executives with respect to litigation are “What’s the case about?” and “Will we win?” Both are fair questions and the latter one is hard as hell to answer. To get to the answers you need to analyze the complaint (see above) and then, use the documents and facts you have gathered up to start to take positions on the question of “winning.” Earlier you prepared a summary of what the case is about. Now you need to take the next step. Here’s what you need to assemble:

Set out your defense strategy, including how you will defend the claims, including any affirmative defenses and, if you’re lucky, your own counterclaims (as there is no better defense than your own claims against the plaintiff). Set out what facts and documents support you and which cut against you. To do this properly, you need to make sure you have the applicable jury instructions for each claim so you know each element of what the plaintiff must prove.
Summarize the other sides’ position, including damages sought and any type of non-monetary relief like an injunction. Basically, what’s the plaintiff after and how strong is their proof?
Discuss any expert witnesses needed and the subject matter of their testimony (including for the plaintiff’s side). If you have experts in mind or know the other sides’ experts, describe what you know about their credentials and effectiveness as a testifying witness.
Describe your venue, the judge, and (if a jury trial) the typical jury pool for this court and tendencies to be plaintiff or defense oriented. You may need to speak with local counsel for this. And they don’t call them “hell holes” for nothing. As sad as it is, there are judges out there who wear their preferences on their sleeves. Likewise, there are jurisdictions well known for the propensity of large jury verdicts. Gather as much information as you can on what you are facing and share it with the business.
Discuss your opposing counsel and what you can find out about their abilities, past trials, reputations, work ethic, tactics, and so forth. The personalities and abilities of the trial lawyers are very important as to how litigation will develop and end.
What is a “good” litigation outcome for the company? The ECA should discuss this issue and come up with a range of possibilities. However, it will be at the meeting with the executive team where you will truly define your marching orders as to what constitutes “winning” and all your efforts thereafter will be aimed at that goal.

6. Timeline. It seems a bit old-fashioned but you will be shocked at how much useful information you can obtain via a fulsome timeline (sometimes called a chronology of events). It’s not difficult to prepare. All you need to do to list in chronological order, the key events (facts) of the case, and tying each event to relevant documents, if any. Basically: date, fact, source, and disputed/undisputed. Don’t worry if a fact is disputed. Put it in there and worry about how to deal with it later. Also, this timeline is not a list of documents, it is a list of facts. Big difference. Further, in addition to helping the attorneys with initially analyzing the case, a good chronology is helpful for outlining the discovery you will need. It is also helpful when you are explaining the litigation to management (or for large cases, to the Board of Directors) as they can see for themselves all the key events of the dispute. Of course, you will keep and continue to update and refine your chronology long after you have finished the ECA.

7. Themes of the case. Ensuring you have the right themes for your case is crucial to winning at trial. Themes are basically short-cuts that help the fact trier (usually the jury) understand the case, providing a simple filter through which they evaluate the testimony and written evidence. It’s the story of the case. There are four elements to a theme: a) it is understandable, b) it comports with the evidence, c) it is memorable, and d) it rings true. The most famous theme I can think of comes from the O.J. Simpson trial back in the mid-1990’s: “If it does not fit, you must acquit.” As you may recall, the O.J. trial went on for months and months, with dozens of witnesses and all manner of scientific evidence. If you were a juror at that trial, it is difficult to imagine how you could keep it all straight. The defense team came up with a brilliant short-hand that satisfied all four elements and gave the jurors a way to decide in Simpson’s favor – the dramatic moment when the prosecution had Simpson try on the bloody gloves found at the scene of the crime. They didn’t fit. Regardless of the reason why they might not have fit, the theme of “If it does not fit, you must acquit” cut right into the heart of the prosecution’s case and played wonderfully into the basic underpinning of American criminal law: you must be proven guilty beyond a reasonable doubt. This theme gave the jury plenty of doubt. As you assemble your assessment, you will be on the lookout for the best themes for your case. It doesn’t mean they are locked in stone, but it gives the trial team and the executive team a way to start to look at and analyze evidence – all with the purpose of strengthening the themes of the case. You should also try to anticipate the themes the plaintiff might use in their case. This helps you think of ways to fight their themes and develop evidence that will undercut them at trial.

8. Settlement options. If you have been involved in commercial litigation you know that over 90% of cases settle. Trials are rare. Mostly because of the cost and the risk of an adverse decision, especially if it involves a jury. Since you know it’s likely going to settle, one of the most important tasks of an in-house lawyer and a key section of the ECA is to deftly and properly evaluate the case for settlement, meaning primarily how much would be the right amount to pay to get rid of the litigation? A starting point, unfortunately, is the cost of litigation. Would you bring your risk to zero by paying the other side an amount equal to or less than your anticipated cost of litigating? The more substantive factors focus on your analysis of the claims against you (or any counterclaims you might bring). If you conduct the ECA properly you will have a fairly good idea about the likelihood of winning or losing a particular claim. Once you have that analysis you can prepare a decision tree. A decision tree is basically multiplying the percentage of risk times the value of the claim. For example, if you think you have a 60% chance of winning the claim and the claim is for $100,000 your risk is $40,000. It is usually more complicated than that and for more on the use of decision trees in litigation, click here. Of course, cash money is not the only way to settle a case. A new contract, license, or agreement to cooperate on a project might be enticing to the other side. Likewise, credits to use against product purchases are a way to give value without paying “full price.” The bottom line is to think creatively with your outside counsel and your business team about potential settlement offers.

9. Other considerations. While you are evaluating the case, there is more to keep in mind than just winning and losing in court. Part of your task here is to think of all the areas of concern surrounding the lawsuit. One thing your ECA should do is flesh out any embarrassing documents or trade secrets that you will need to be concerned about. Litigation in the courts is generally not confidential and anything dredged up during discovery may very likely end up in the newspapers or trade press. While there are processes to keep trade secrets confidential, there are no guarantees as to what the judge will actually do. Simply embarrassing or dumb emails and documents stand little chance of being kept private in most courts. A motion in limine is usually your only shot, and good luck with that. It’s just the price you must pay to litigate. Consequently, the lack of confidentiality is a very important consideration for the company in analyzing how to deal with a lawsuit. Other considerations might include the reputation of the company, reaction of customers, or even the business relationship with the other side. If you are a small vendor to a large company, you may find it very damaging to the relationship to let a dispute drag on in the courts. It might not be fair, but resolving the fight quickly might be in the best long-term interests of the company.

10. Lessons learned. Everything discussed so far is part of the analysis and process of creating an ECA. But not all of the work goes into the creation. You need to be sure to take time after you’ve completed the ECA (or after the case has ended) to look at the information you gathered about the dispute and determine what lessons can be learned. Are there things the company should do differently going forward to avoid similar problems? Were documents and emails prepared properly? Do your employees need a lesson on writing smart? Do your contracts need rewriting or new clauses to better protect the company? You’ve just spent a tremendous amount of time and effort tearing into the reasons why the dispute arose, that information has additional value. Use it. Your highest value as an in-house lawyer occurs when you proactively look for ways to avoid problems from occurring.

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The above is written from the point of view of an American litigator defending a lawsuit. Regardless, the elements of an Early Case Assessment work equally well in just about any country and whether you practice in a jurisdiction where juries are used for civil disputes or not. An ECA is not needed for every piece of litigation you deal with in-house. It’s a lot of work and so there will likely be cases where the amount of effort is not warranted. But, most of the principles above can be used to some degree even with “smaller” litigation. Now that you know the basics, you can create your own ECA process. Utilizing an Early Case Assessment provides you with a repeatable process to evaluate litigation. Any type of repeatable process will, if consistently used, become easier and will lead to cost savings and insights into how your company operates in ways that lead to disputes. With those insights, you can begin to change behaviors that will lead to fewer disputes. For those that do arise, you will find that they are resolved faster and with better outcomes for the company.

Sterling Miller

January 15, 2018

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[1] I am pleased to say that while I ignored the ECA part of the Post-It note, I have called my mom repeatedly over the past three years.